Sustaining Forests and Livelihoods in a Changing World

January 29, 2013


  • Hundreds of millions of people around the world depend directly on forests for their income and subsistence, including many people living in extreme poverty.
  • Forest resources contribute to the natural environment on which food production depends and absorb around 15 percent of greenhouse gas emissions.
  • They also protect vital watersheds and reduce the risk of natural disasters, including floods and landslides.

Forests have a central role to play as the world confronts the challenges of climate change, food shortages, and improved livelihoods for a growing population. If predictions prove correct, the world will need to shelter, feed, clothe, and provide livelihoods for another two billion people by 2050. This presents a staggering challenge, particularly given new research from the World Bank showing that world temperatures could rise by 4 degrees Celsius this century, impacting water availability, agriculture, and severe weather events. By 2025, two-thirds of all nations will confront water supply stress, and 2.4 billion people will live in countries unable to provide sufficient water for basic health, agriculture, and commercial needs.

For centuries, forests have served as a kind of natural safety net for communities during times of famine or other events that impact agricultural and food production; they provide fruits, leaves, gum, nuts, timber, and wood for fuel. Forests feed people and the animals they might depend on for trade or meals when crops fail.

At the same time, many of the world’s remaining forests are under increasing threat because of human activities and climate change. Although the pace of deforestation has slowed in some regions, the world still loses about 14.5 million hectares of forests each year. In parts of the Amazon rainforest, rising temperatures and changing rainfall patterns are connected with the increased risk of catastrophic dieback with dangerous local, regional and global consequences. In the Congo Basin, a recent analysis of deforestation trends published by the World Bank, highlights the intense pressure that agricultural expansion, mineral exploitation, growing energy needs, and an improved transportation network will pose to the integrity of this vast rainforest area.

If countries are able to pursue inclusive green growth strategies that overcome some of the more severe trade-offs between growth and forest protection, the deforestation that has historically accompanied development in many countries could be slowed, making an important contribution to climate change mitigation.

If the world is to confront the challenges of mitigating and adapting to climate change while meeting the demands of a rapidly-growing global population, it is vital that we find the balance between conserving and regenerating forest areas with economic growth for poverty reduction.

This is what the World Bank’s work on forests aims to achieve.

The World Bank’s approach to forests

A little over 10 years ago, the World Bank shifted course on its forest strategy to better reflect the reality that a forest is not simply a physical asset that can be cleared, logged or protected. In fact, a forest influences – and is impacted by – linkages to an array of other activities and sectors, particularly agriculture and water, but also energy, mining and transportation at the local, national and even global level. In its 2002 Forest Strategy, the World Bank spelled out this understanding and pledged to support countries in their efforts to harness the potential of forests to reduce poverty, better integrate forestry into their economies, and protect and strengthen the environmental role forests play, locally and globally.

These three objectives have underpinned the World Bank’s work with governments, communities, and private enterprise across all the relevant sectors connected with forestry. In all, the Bank approved 289 forest-related projects in 75 countries between 2002 and 2011. The examples below provide a snapshot of some of the results accomplished in three thematic areas in that time.

More resilient, integrated landscapes for poverty reduction

Over the centuries, the world has experienced vast forest loss with the spread of agriculture and population growth. To reverse deforestation trends requires a change in policies and laws, institutions, and incentives, in and beyond the forestry sector. This “landscape” approach embraces activities such as restoring degraded forest land, boosting agricultural productivity, realigning farm and forest incentives to protect forests from being converted into farmland, introducing trees on farms and ranches, and involving local communities more directly in the design and oversight of forest management.

The World Bank also emphasizes the benefits from integrating different farming approaches – including crop production, livestock, and tree farming – into one area, to diversify livelihoods, increase resilience to economic and climate shocks, and capitalize on natural synergies, for example in the water, carbon and nutrient cycles.

In China, the World Bank was the biggest financier of an ambitious plan to increase forest cover after devastating floods along the Yangtze River. Between 1985 and 2007, the World Bank supported China's forestry sector through 8 projects covering 21 provinces, resulting in over 3.8 million ha of newly established forests (around 12 percent of the country's newly planted forests). Besides mitigating greenhouse gas emissions and reducing soil erosion, the increase in forest cover has had significant impacts on people’s livelihoods. One project specifically targeted poor areas in 12 provinces, training farmers to plant and care for a range of profitable trees. Economic trees like chestnut, gingko and bamboo helped boost average annual income by 150% between 1998 and 2004.

In Albania, the World Bank worked with the government on a forest project that showcased the benefits of this landscape approach. By integrating forest, pasture, and agriculture management, the Bank-backed initiative led to reduced carbon emissions, the protection of important watersheds, and an increase of 28 percent in incomes in some areas from forests and agriculture. The project was successful in bringing more than 775,000 ha of land under the management of local communities.

In Ethiopia’s Great Rift Valley, the World Bank partnered with World Vision to pilot an approach that was both integrated and inclusive and led to large-scale landscape restoration with significant livelihood and resilience outcomes. Forest cooperatives were created to oversee the reforestation of the Humbo mountain area by encouraging natural regeneration and limiting wood, charcoal and fodder extraction. Improved land management has stimulated grass growth, providing fodder for livestock that can be cut and sold as an additional source of income. The restored project area provides protection against dangerous landslides and improved water availability for more than 65,000 people. The project is expected to sequester over 880,000 metric tonnes of carbon dioxide-equivalent over 30 years, with the World Bank purchasing 165,000 metric tonnes worth of carbon credits through its BioCarbon Fund.

These projects point to the tremendous potential to boost people’s physical and financial security by restoring degraded forest land. Worldwide, an estimated 2 billion hectares of lost or degraded forest landscapes could be restored and rehabilitated. If those “landscapes of opportunity” were to be restored to functional and productive ecosystems, they could help deliver a triple win by improving rural livelihoods and food security, increasing climate resilience, and helping mitigate greenhouse gases - while taking pressure off pristine forests.

Managing natural capital for economic growth

In forest-rich countries, forestry can be a source of economic growth and employment. More than 160 million people worldwide find work through forest enterprises. If harvested responsibly, forests are also a renewable source of building material, fiber and fuel – tremendous assets as the world looks to reduce the carbon footprint of human activities. At the same time, forests are one of the most mismanaged resources in many countries, partly because they are undervalued and partly because poor governance has fuelled illegal activities.

Helping governments to improve economic policy and the management and governance of the forest sector is therefore an important priority. The World Bank’s starting point is to ask how can practices that have often led to significant forest degradation, tax evasion and corruption, be reformed, so that forests contribute more revenue to the state, produce more and better jobs, and result in more sustainable development?

The costs of inaction are severe. Worldwide, the failure by governments to collect royalties on the legal use of forests, costs them as much as US$5 billion a year in lost income. Illegal logging costs another US$10-US$15 billion every year in countries in which each dollar of state income is needed to reduce poverty. This sum is more than eight times the amount of money available from official developmental assistance (ODA) for the sustainable management of forests.

The causes of illegal logging and other forest crimes are complex, and often lie outside the forestry sector. Weak governance, including unclear or nonexistent policies or legislation on the use of forest resources is a key issue. Weak institutional structures and an inability to monitor and enforce regulations also hamper progress in many countries. These weaknesses are difficult to address politically, since well-connected interest groups tend to benefit from the status quo and resist change.

However over the last decade, the World Bank, the European Union and other partners have made significant strides in opening the space for dialogue and reform by backing Forest Law Enforcement and Governance (FLEG) processes in different parts of the world. The Program on Forests (PROFOR), hosted by the World Bank, has also made forest governance one of its priority issues, providing technical assistance to improve the monitoring of forest activities and helping create consensus and political will around priority reforms.

Dialogue and engagement with developing countries has led to progress in the way forest rights are allocated. For example, in Cameroon, legal and regulatory reforms that were part of a wider concession reform effort resulted in the first legal recognition of community forests in any part of West Africa. In the Democratic Republic of Congo, a legal review of concessions led to a significant reduction in the area under concession management, to 9.7 million ha in 2008, from 43.5 million ha in 2002. At the same time, steps were taken to bring communities into decision-making processes in forest management, to clarify the rights of traditional forest users, and to develop new models for payments for environmental services. And in Gabon, around 4.7 million ha in forest concessions were cancelled, creating the opportunity to develop new approaches to sustainable forest management.

In Mexico, where some 80 percent of forests are owned by indigenous and other communities, the World Bank helped fund a project to strengthen community forestry by improving forest management plans. The support, which was rolled out in phases since 1997, helped increase the contribution of forests to local development. For example, a project evaluation found that between 2003 and 2008, jobs had increased by 27% in targeted communities and ejidos, while the net value of forest goods and services they produced increased by 36%. In 2011 the coverage of this support was extended to all 32 states in Mexico.

In Liberia, a forest-rich West African country where timber was once used to purchase weapons and fuel a devastating civil war, forest policy reform has slowly allowed the country to resume selective logging activities within an improved legal framework in which sustainable forest management principles, community rights and conservation needs are formally recognized. In 2010-2011, the World Bank, through the Program on Forests, stepped in to co-finance the roll out of a “chain of custody” system that tracks timber from the forest of origin to the point of export through barcodes and data forms. That system assisted in securing more than $27 million in net tax revenue for the state in 2008-2012. Although many implementation challenges remain, these reforms have benefited the country by creating greater transparency around logging revenue and a platform for stakeholders to demand more effective change.

Through its private sector arm, the International Finance Corporation, the Bank Group has also encouraged responsible corporate investments across the forest products supply chain and worked to create a more level playing field for legitimate forest-sector enterprises that adopt sustainable forest management practices. For example, IFC started investing in 2003 in a company that produces high-quality particleboard products for the construction industry. The company has achieved Forest Stewardship Council certification for its 230,000-hectare concession in Russia, while encouraging third party suppliers to adhere to sustainable forest management practices.

Valuing and preserving environmental services

Forests provide many essential environmental services, from absorbing and stocking carbon that would otherwise contribute to climate change, to regulating water cycles, hosting 80 percent of the world’s terrestrial biodiversity (including pollinators crucial to food security), maintaining soil quality, and reducing the risks of natural disasters such as floods at a time when many of these systems are coming under tremendous pressure. While these services have been difficult to quantify and value in the past, new research into natural capital accounting, innovative market approaches, and political awareness have contributed to a growing appreciation for the preservation of natural resources.

The challenge for policy makers is to bring these values into markets, into decisions that affect more than one sector, and into macroeconomic and development policy in general. Over the last decade, the World Bank has worked with partners to increase financing for forest conservation and protection, and has been engaged in the development of effective markets for the environmental services that forests provide, including biodiversity protection, carbon sequestration, and watershed management.

For example, the Bank played an active role in promoting the establishment of protected areas in the Brazilian Amazon. Bank teams worked for several years with local and federal authorities and non-governmental organizations (NGOs) including the World Wildlife Fund to protect Amazonian forests. The Amazon region accounts for an astonishing 30 percent of the world’s remaining tropical forests and about half of all the species on the planet but it has been under threat from the growth of agricultural and livestock areas and other logging activities. In its first phase, the Amazon Region Protected Areas project (ARPA) helped designate around 24 million hectares of new protected areas, an area roughly equal in size to the United Kingdom. Additionally, the project helped classify 45.4 million hectares as indigenous lands and set aside 2.1 million hectares into special reserves for sustainable, community-managed use. The project tackled successfully some of the daunting concerns in ecosystem protection today: enforcement of environmental laws in remote areas; the needs and aspirations of rural people for improved livelihoods; and the valuing and funding of conservation activities against a wider backdrop of ongoing resource exploitation. In its second phase, ARPA will cover nearly 70 million hectares of rainforest, saving more than 1.1 billion tons of CO2 emissions through 2050.

The Bank Group has also explored a wide range of opportunities to help developing countries reduce greenhouse gas emissions from deforestation and forest degradation, and to conserve, sustainably manage and enhance forest carbon stocks. This approach, known as REDD+, will likely rest on a complex mix of multilateral and bilateral assistance, civil society efforts, private sector initiatives and carbon markets. The Bank’s approach has been to prepare and pilot different REDD+ initiatives through partnerships.

The Bank serves as the Trustee and the Secretariat of the Forest Carbon Partnership Facility (FCPF), a global partnership that is helping countries draft REDD+ readiness plans and will provide carbon payments to countries that meet certain targets. The Bank is also the implementing organization, together with other multilateral development banks, of the Forest Investment Program (FIP), and is financing pilot investments for reforestation and soil carbon through the BioCarbon Fund, a public-private initiative that mobilizes resources for pioneering projects that deliver emission reductions, while promoting biodiversity conservation and poverty alleviation. Those interventions, blended with more conventional World Bank lending activities, are converging to create transformative change in the forest and broader rural sector in places like the Democratic Republic of Congo and Mexico.

Such alliances are critical to ensuring the world has the funds necessary to confront the vast array of challenges in protecting and better managing forests. While the World Bank currently is the largest single source of finance in the multilateral community for forest projects, its loans and grants are only a fraction of what is needed to navigate the trade-offs between forest protection and economic growth and secure a prosperous and sustainable planet for future generations.